The United States District Court has ordered a permanent injunction against
a Chicago-based debt collection company. Stark Recovery targeted both
consumers and other collection agencies with fake debt portfolios. The
company threatened consumers with litigation if they did not pay these
false debts and sold these debts to collection companies alleging their
legitimacy. In a comment made to the press, Director of the FTC’s
Bureau of Consumer Protection, Jessica Rich, stated, “It’s
illegal to harass people to pay debts they clearly don’t owe, and
to sell phony debts to other debt collectors. We’re proud to partner
with the Illinois Attorney General to halt these egregious debt collection
The case is a part of the ongoing federal and state effort known as Operation
Collection aimed at protecting consumers from collectors that use deceptive
and abusive collection practices. Stark Recovery used names such as Stark
Law and Capital Harris Miller & Associates while conducting business.
Since 2011, the defendants used these various names target consumers who
obtained or applied for payday or other short-term loans. The defendants
called consumers and demanded payment of supposedly delinquent loans even
when they had no authority to collect. The defendants also threatened
consumers with lawsuits or arrest if consumers did not pay the false debt
claims. They stated that the consumers would be charged with “defrauding
a financial institution” and “passing a bad check.”
However, failure to pay a private debt is not a crime. The defendants
also falsely represented themselves as a law firm with the ability to
Consumers were barraged with improper phone calls and the complaint states
that many consumers paid debts that they did not owe because of the threatening
phone calls. The company is also charged with selling fake debt portfolios
to debt buyers. After the sale, these debt buyers attempted to collect
on these false accounts. The defendants had not issued loans to the consumers
listed in these portfolios. This is the first time the FTC is faced with
a case involving the sale of false debts.
Operation Collection Protection has had several successes since the FTC’s
announcement of its commencement in January. These successes include:
-The Consumer Financial Protection has resolved four debt collection law
-The Minnesota Department of Commerce took eight actions, imposed fines
up to $50,000 against Alliant Capital Management, LLC, Premier Recovery
Group JD and Associates, Mountain West Legal Solutions, Creedence Resource
Management LLC, Selene Finance, and Credit Protection Association for
-The Minnesota Department of Commerce received a court order against Weinerman
and Associated for failing to maintain a license, improper handling of
client funds, and other violations.
-The Idaho Department of Finance revoked the license of Oxford Law LLC
and RJM Acquisitions for failing to maintain a surety bond as required
by state law.
-The Colorado Department of Law entered into a stipulated final order against
Collecto Inc. and imposed a $99,000 penalty for violating notice requirements
for consumers and improper credit reporting.
Actions such as these are a clear indicator that the state and federal
governments are serious about protecting the right of consumers.